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Valley impacted as rising material costs making it impossible for builders to solve housing shortage

Posted at 5:37 PM, May 20, 2021
and last updated 2021-05-20 22:20:39-04

PHOENIX — The sound of hammers and heavy equipment is being heard across the Valley. It is the place where our state's housing boom all begins; where raw materials are turned into the structures that help grow our families and expand our communities.

But an incredible demand for homes is now driving prices sky high and putting further pressure for more product on an already-overwhelmed industry.

Track Arizona home values by zip code as of April 2021 in the map below.

“Customers are more open than ever before, just to get into home ownership,” said Andrea Murphy, Vice President of Sales at Taylor Morrison Phoenix.

Murphy says that insatiable appetite is getting more difficult to fill for builders.

Major price increases on materials and lengthy delivery delays, as a consequence of the pandemic, are changing the equation. Lumber prices alone have added $36,000 to the cost of building the average home. It’s an issue already forcing some companies to dial back their plans.

“There’s so many things that are changing on a daily basis for the home builders that we’re trying to do our best to predict it,” said Murphy.

Federal data collected from HUD shows permits in Arizona for new single family home builds have consistently risen since 2013. Between 2019 and 2020, new permit requests were up more than 25%, with 33,000 permits having been requested in 2019 vs. 41,510 in 2020.

New figures from the National Association of Home Builders shows, since May of last year, the Phoenix Metro area ranks third in the nation among other large cities when it comes to permits for new home construction. However, permits don’t equal completed houses.

“At some point there’s only so much we can fulfill,” said Murphy.

“The first thing a builder's going to do now is put an escalator clause in the contract that says, 'Ok, I think the lumber for your project is going to cost x, but by the way, if it costs Y, you're still on the hook for it,'” said Jerry Howard.

Howard, the CEO of the National Association of Home Builders, says other companies are holding off on building completely until those costs stabilize. The organization is now calling on the Biden administration to act by bringing the entire building supply chain together to find a solution.

“The other thing we’re asking them to do is, at least temporarily, is repeal the importation of tariffs on Canadian lumber, because at the same time as we’re not producing enough, it’s difficult and expensive to get lumber from Canada,” said Howard.

It’s a solution that certainly won’t happen overnight and leaves Howard suggesting it may take years to catch up to current demand.

“I think it’s going to take a few years now for us to get back, and that’s only if they change policies, otherwise I couldn’t predict when we’ll get back,” said Howard.

“I’ve been in the business for 20 years. This is, I don’t want to say uncharted waters, but in a way it is,” said Murphy.

And the way it is for buyers, at least in the short term, equates to continued record-low inventory, record-breaking prices, and a more competitive market than we’ve seen in over a decade.